This is apparently a complicated issue and so the Government has announced it is engaging in a round of consultations led by no less a personage than the Secretary of the Department of Communications and the Arts.

The Secretary is required to report to the Minister on the outcome of the consultations by early June 2017.

Press announcement here and, if you want to try to be invited to the consultations, some contact details here.

Anybody wonder what President Trump would do if he found out we were in breach of the Australia – United States Free Trade Agreement?[2]

The safe harbour provisions protect “carriage service providers” from liability to damages where they merely provide the facilities used by an infringer: see ss 116AC, 116AD, 116AE and 116AF. ?

This is the second decision under s 115A of the Copyright Act 1968 empowering copyright owners (and their agents) to seek injunctions against third parties (i.e. ISPs and telcos) to block access to offshore infringing websites.

This follows the release way back in December 2015 of an exposure draft bill.

According to the EM, the main topics covered in this version of the bill are:

” replace the current exception for persons with a disability, and others acting on their behalf, with a fair dealing exception;

” replace the current statutory licences for institutions assisting persons with a print or intellectual disability with a single exception that applies to organisations assisting persons with a disability;

“? set new standard terms of protection for published and unpublished materials and for Crown copyright in original materials; and

“? make minor amendments to update references to Ministers and preconditions for making regulations extending or restricting the operation of the Act in relation to foreign countries.”

Those of you with long memories will notice that the amendments in the exposure draft to bring the safe harbour provisions for “carriage service providers” (see s 116AC to 116AJ) into line with Australia’s obligations under the US Free Trade Agreement (way down in chapter 17 article 29(b)) is missing from that list. The rights holders’ interests were very strongly opposed to that change and, presumably, the Government is betting that President Trump’s America will not be too fussed.

In relation to the term of copyright in unpublished works – currently perpetual (until published) – the Minister explained the intended effect of the amendments:

The bill harmonises the copyright term for works (including a literary, dramatic, musical or artistic work) by creating a new standard term of 70 years from the death of the author, irrespective of whether the relevant work has or has not been made public. This means that an unpublished work will have the same term of copyright protection as a published work. Where the identity of the author remains generally unknown, or the work is made by an international organisation to which the act applies, the standard copyright term will be 70 years from when it is made. However, if this work is made public within 50 years of being created, the copyright term will be 70 years from first being made public. For sound recordings and films, a standard copyright term of 70 years from the year in which the material is made will apply. However, if the sound recording or film is made public within 50 years of being made, the copyright term will be 70 years from first being made public.

Like this:

A Following up last week’s quick note, a closer look at Nicholas J’s decision in Roadshow Films v Telstra ordering the ISPs to block access to a number of offshore websites on the basis that they were primarily sites which infringe, or facilitate the infringement of, copyright (which unhelpfully didn’t publish last year on schedule). Oh well, hopefully better late than never!

There were two separate actions: one brought by Roadshow Films and the second brought by Foxtel. Both proceedings sought orders against essentially three groups of ISPs: Telstra, Optus and TPG. Roadshow also sought orders against M2. Roadshow was seeking orders under s115A compelling the ISPs to block their subscribers’ access to a number of SolarMovie sites (which in the end resolved back solarmovie.ph). Foxtel was seeking the injunctions to block access to various Pirate Bay, Torrenz, TorrentHound and IsoHunt websites.

The ISPs did not contest the injunctions, but there were disputes about some of the terms.

The injunctions

Nicholas J therefore ordered that each of the ISPs take reasonable steps to disable access to “the Target Online Location”. By way of example, the Target Online Location in the Roadshow matter was defined as the online location or online locations known as “SolarMovie” that are or were accessible:

(b) IP Address blocking or re-routing in respect of the Target IP Addresses;[2]

(c) URL blocking in respect of the Target URLs and the Target Domain Names;[3] or

(d) any alternative technical means for disabling access to a Target Online Location as agreed in writing between the applicants and a respondent.

It seems from his Honour’s reasons that the ISPs expect to use DNS Blocking.

After the hearing in June, the particular Solarmovie sites went offline. Nicholas J was satisfied, however, that s 115A still permitted him to make orders blocking access. In contrast, his Honour did not consider there was sufficient evidence to block access to some of the Pirate Bay URLs associated with “CloudFlare”, but which had always been inactive. Nichols J accepted that these websites gave rise to “suspicion”, but it was not strong enough to warrant ordering an injunction.

Landing pages

Nicholas J further ordered that the ISPs must redirect communications attempting to view the “blocked” websites to a landing page. The ISP could choose to set up its own landing page but, if it did not wish to incur those costs, it was required to notify the relevant applicant. Once notified, the relevant applicant had to set up a landing page stating that access to the website had been disabled because the Court has found that it infringes, or facilitates the infringement of, copyright.

Whack-a-mole

Given the ease with which a website can be shifted to a new address, Roadshow and Foxtel sought orders that they add to the list of blocked addresses by letter to the ISPs.

Unlike the English courts, Nicholas J considered that an extension of the orders to other websites should require the involvement of the Court. Accordingly, his Honour ordered that applications to extend the orders to new iterations should be made to the Court on affidavit with proposed short minutes of order to extend the injunctions. This imposes some constraint on the use of such injunctions by enabling the ISPs to object.

How long

Nicholas J ordered that the scheme set in place should run for an initial period of 3 years. Six months before that expiry, however, the applicants can provide affidavit evidence to set out their case for an extension. The ISPs then have an opportunity to object or, if no objection is forthcoming, the Court may order an extension.

Costs

Roadshow and Foxtel did not seek costs. The respondents did.

Nicholas J considered that the costs of the ISPs incurred in setting up the technical requirements for the scheme to operate were simply costs of doing business and so to be borne by them. They were costs that would have to be incurred independently of these particular actions.

However, his Honour ordered that each ISP could charge $50 for each domain name included in the orders. His Honour considered that, as each ISP proposed to use DNS Blocking, a uniform figure should be used. $50 was a bit lower than some ISPs wanted and a bit higher than others.[4]

Nicholas J also ordered that the applicants pay the ISPs costs of the proceeding relating to the method for extending the regime to new iterations of a website and compliance costs.

Nicholas J defined DNS Blocking as “a system by which any user of a respondent’s service who attempts to use a DNS resolver that is operated by or on behalf of that respondent to access a Target Online Location is prevented from receiving a DNS response other than a redirection as referred to in order 5.” Apparently, at [13], “ISPs can block access to specific online locations entered into the address bar of the Internet browser, by configuring their DNSS to either return no IP Address so that an error message is displayed to users or so that users are directed to a predetermined IP Address that differs from that designated by the specific online location’s IP Address.” ?

At [15], his Honour explained that IP Address Blocking involves the ISP not routing outbound traffic to the specified address. This apparently can be problematic as it can also block access to other websites stored on the server with the specified address. Hello ASIC, anyone? ?

At [14], Nicholas J described URL Blocking as comparing the destination address specified in a “packet” of data being routed across the internet to a list of addresses to be blocked and, if there is a match, blocking transmission. ?

This amount is an interesting contrast to the figures quoted by the Court of Appeal in the Cartier case in England at [19] which ranged from (in GBP) three figures to six figures each year. See also [129] – [150] of Cartier. ?

The Government has announced it is undertaking further consultations with us about the Commission’s recommendations and wants to hear your views by 14 February 2017. I wonder how many bunches of roses they will receive?

Like this:

Nicholas J has published his reasons granting the film companies injunctions against the ISPs ordering them to block access to third party offshore “solarmovie”, pirate bay, torrenz, torrenthound and isotorrent sites.

Like this:

You will recall that Beach J ordered Lucky Homes and the Mistrys to pay Henley Arch $34,400 by way of compensatory damages and Lucky Homes to pay $25,000 and Mr Mistry $10,000 by way of additional damages for infringing Henley’s copyright in its Amalfi plan. An earlier post looked at the Mistry’s claim to apportion liability (refused) and their cross-claim against Lucky Homes for misleading or deceptive conduct. This post adds some comments on the damages awards.

Some background

You will recall that the Mistrys had their first house built for them by Henley according to one of Henley’s designs. When they came to build their next, “dream” home, they began negotiating with Henley to use its Amalfi design. Just before they signed up with Henley, however, they met with Lucky Homes. Within a very short space of time, the Mistrys signed up with Lucky Homes to have it build for them what was in effect an Amalfi home with “some” changes.[1] The changes did not avoid copyright infringement.

Innocent infringers

The Mistrys claimed they were ‘innocent infringers’ and invoked the protection of s 115(3) which provides:

Where, in an action for infringement of copyright, it is established that an infringement was committed but it is also established that, at the time of the infringement, the defendant was not aware, and had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright, the plaintiff is not entitled under this section to any damages against the defendant in respect of the infringement, but is entitled to an account of profits in respect of the infringement whether any other relief is granted under this section or not.

This “defence” has both a subjective element and an objective element. The Mistrys had to prove that they were not actually aware what they did was an infringement and they had no reasonable grounds for suspecting it was.

These are not easy tests to satisfy and it is very rare for them to be invoked successfully.

His Honour went further. At [194], Beach J considered that a reasonable person in the Mistrys’ shoes, about to spend $250,000 on a new build would not have acted on Lucky Homes’ assurances that it would change the plans sufficiently to avoid infringement “without checking with a lawyer” first. His Honour explained:

the assurances given by Mr Shafiq that only 15 to 20 changes were required ought not to have been relied on by persons who were proposing to spend nearly $250,000 based on that assurance, without checking it with a lawyer, particularly in the light of the specific acknowledgements set out in the various versions of the tender documents that they had notice of. The fact that the Mistrys did rely upon Mr Shafiq’s representations does not establish the objective limb of “no reasonable grounds”. Moreover, to say that they relied upon Mr Shafiq’s statements does not necessarily entail that they had no suspicions about whether they could use the Amalfi Avenue floorplan. In my view, whatever Mr Shafiq said, the Mistrys had reasonable grounds for suspecting that the use of that floorplan constituted an infringement. At the least, they have not discharged the onus of proving that they had no reasonable grounds for suspecting.

S 115(2) damages

Damages under s 115(2) are in the alternative to an account of (the infringer’s) profits. S 115(2) damages are compensatory; they are to put the copyright owner back in the position it would have been in if there had been no infringement (so far as a monetary award can do that).

Beach J considered that the “lost profits” method was the appropriate measure in this case. That is, the profit Henley lost on the Amalfi house it would have built if the Mistrys had gone ahead was the appropriate measure.

As the “lost profit” here was the loss of a chance or opportunity, Beach J noted that there were two steps to the inquiry. First, a determination whether there had in fact been a lost opportunity. Then, secondly, the value of that opportunity. His Honour explained at [213]:

where one is utilising the lost profits method based upon the loss of a chance or opportunity, there are two questions to consider. The first question is whether there has been such a lost opportunity. This is determined on the balance of probabilities. The second question is what is the value of that lost opportunity. That is to be decided on the possibilities or probabilities of the case (Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ and at 365 to 368 per Brennan J). But some estimation or even educated guesswork under either question may be required and is justifiable.

The Mistrys of course said they never would have contracted with Henley. They had become too frustrated with delays and the price for the house with the facade they really wanted was too high ($10,000 higher than the more basic option).

Beach J rejected this claim. His Honour pointed out that, until they met with Lucky Homes, the Mistrys had been anxiously pressing Henley to finalise the contract documentation, even demanding it move up the settlement date. His Honour also rejected the Mistrys’ complaints about the delays in process as “implausible”. Amongst other things, Henley couldn’t finalise the buidling contract until the certificate of title to the land had issued to the Mistrys and that had occurred only a week or two before the Mistrys were introduced to Lucky Homes. This was to be the Mistrys’ “dream home”. They were anxious to get its construction underway. If Lucky Homes hadn’t turned up, Beach J did not think it realistic that the Mistrys would have abandoned the process with Henley and start all over again.

However, Beach J also rejected Henley’s argument that it was practically certain the Mistrys would have bought the house from Henley. Instead, at [221], his Honour considered the profit Henley would have made needed to be discounted by 20% “to reflect some aspect of uncertainty as to whether the Mistrys would have proceeded with Henley Arch absent the infringing conduct.”

On the question of quantum, Beach J considered that EBIT (earnings before interest and tax) was the appropriate measure.

When it comes to calculating profits, there is usually a ding dong battle over how much should be excluded from the gross profits to allow for overheads. Beach J side-stepped that fight here. In a context where Henley was building about 1,000 homes a year, it was unlikely that there would have been any increase in its overheads building the home for the Mistrys, a single house.

Henley’s evidence was that the total profit after allowing for variable (direct) costs it would have made was $48,231.83 (ex GST). There were some evidential disputes about this, but his Honour considered it was reasonable. At [235], Beach J declared it should be reduced by 10% to allow for contingencies and to reflect the uncertainty in the estimates advanced, and rounded that calculation down to $43,000.

That had to be further discounted by 20% to reflect his Honour’s finding that there was only an 80% chance the Mistrys would indeed have bought the house from Henley. Thus the award of $34,400.

Additional damages

Unlike damages under s 115(2), damages under s 115(4) may include a punitive element – to punish the wrongdoer and to deter others.

Henley contended that $250,000 would reflect the culpability of Lucky Homes and $75,000 that of Mr Mistry. Beach J considered these amounts wholly disproportionate. Accepting the degree of culpability involved and, amongst other things, taking into account the (un)likelihood of repetition of the conduct and the parties’ respective abilities to pay, his Honour ordered that Lucky Homes pay $25,000 by way of additional damages and Mr Mistry $10,000.

You will remember that, on the Mistrys’ cross-claim, Beach J ordered that Lucky Homes only had to be accountable for 50% of the additional damages awarded against Mr Mistry. This was because Mr Mistry’s participation in Lucky Homes’ creation of a copy of Henley’s pro forma plan without Henley’s copyright notice and his unsatisfactory approach to giving evidence meant Mr Mistry should bear some proportion of the sanction himself.

Beach J did not consider Mrs Mistry’s involvement in the infringing conduct warranted any award of additional damages.

The (NSW) Court of Appeal has rejected WIN’s argument that its exclusive licence to broadcast Nine Network’s content extended to “live streaming” over the internet.

Those of you who have emulated Burke and Wills and wandered out of the CBD of your state’s capital city may have discovered that free-to-air television is (a little bit) different. There are regional broadcasters who arrange at least some local news and advertising, but also carry a lot of the programming of the “big” broadcasters.

WIN Corporation is one such regional broadcaster. For many years, it had a “programming supply agreement” through which it took much of the Nine Network’s programming. Thereby bringing the joys of A Current Affair and the Block to those lucky enough to live in a place where WIN was a broadcaster.

The relevant clause (clause 2.1) said:

“Nine grants WIN the exclusive licence to broadcast on and in the licence areas covered by the WIN Stations the program schedule broadcast by Nine on each of the channels known as ‘Nine’, ‘NineHD’, ‘9Go’, ‘9Gem’, ‘Extra’ and ‘9Life’ (the ‘Nine Channels’), to be picked up by WIN at Nine’s NPC.”

The Court and the parties all agred that “exclusive” in this context meant that Nine could not license anyone else to broadcast its content in WIN’s territory. Nor could it “broadcast” its content in WIN’S territory itself.[1]

WIN’s case was that this clause also meant Nine could not allow people in WIN’s territory to access the content through Nine’s website too. (You may already be perceiving some practical difficulties with WIN’s argument, if right.)

The evidence showed that the scope of the grant had been the subject of some negotiation, with Nine contending for a narrow definition and WIN arguing for a broader definition. The trial judge had found this evidence of pre-contactual negotiations did not assist the interpretation exercise. Apart from anything else, it was inconclusive and incomplete.[2]

Barrett AJA pointed out that a playwright could grant an exclusive licence to perform his or her play at a particular time or place, but that did not prevent the playwright from granting someone else a licence to show the play as a film or to perform the play some other place or time. This was important because it meant (you will be surprised to read) that the scope of exclusivity depended on the terms of the grant. His Honour explained at [34]:

The important point is that a person who has a collection of rights and grants an exclusive licence in respect of only some of those rights does not, through the exclusivity undertaking, promise the grantee not to exercise (or allow others to exercise) the remainder of the rights that is not the subject of the grant. The exclusivity undertaking restricts the grantor only as regards the rights granted. Preclusion of the grantor in relation to the whole or any part of the remainder of the grantor’s rights could come only from some contractual stipulation over and above that which is implied by the exclusive quality of the grant.

Applying this, his Honour considered that WIN’s licence to broadcast was limited to the kinds of broadcasting it was licensed to engage in under the Broadcasting Services Act and only within the territories it held a commercial broadcasting licence for. So this meant its exclusivity related only to free-to-air broadcasting in its territory. In the judgment under appeal, Hammerschlag J had explained at [82]:

Where clause 2.1 refers to broadcasting on and in the licence areas covered by the WIN Stations this is, and can only be, a reference to free-to-air. The licence areas are the geographical delimitations imposed on WIN by its licences under the BSA. These licences cover only free-to-air. Unsurprisingly, it is common cause that the WIN Stations have only ever broadcasted free-to-air and under such licences. They are traditional television stations. They do not deliver by internet. Internet delivery is not geographically based in the same way as is free-to-air.

Barrett AJA also rejected WIN’s argument that exclusivity over internet streaming followed from the implied term not to do anything that would deprive the other party of the benefit of the contract. WIN argued it was necessary for the exclusivity to extend to internet streaming as the promise of exclusivity meant it was to be free from competition.

Judging from the number of people watching TV on the train, tram and buses these days, you might think WIN had something of a point.

Barrett AJA, however, considered the benefit for which WIN had contracted was exclusivity from competition in free-to-air broadcasting. Nine was not under a duty to maximise WIN’s return under the contract, but to ensure that WIN had exclusive rights to broadcast Nine’s programming by free-to-air transmissions. His Honour said at [73]:

In the present case, the PSA, according to its correct construction, required Nine to desist from engaging in free-to-air transmission of Nine programs in the WIN licence areas and from enabling persons other than WIN to undertake free-to-air transmission of those programs in those areas. The “benefit” of the contract, from WIN’s perspective, was the right to transmit the Nine programs free-to-air in the WIN areas without free-to-air competition by Nine or anyone to whom Nine had given transmission rights. Extension of the negative stipulation binding on Nine so as to forbid live-streaming would entail a restriction on Nine and a corresponding “benefit” to WIN over and above those created by the contract and, in that way, enlarge rather than support and underwrite WIN’s contracted benefit. The value of the benefit of the contract to WIN was, as in the Queensland case, dependent on many contingencies, some of which were in Nine’s control. But Nine was not obliged to maximise WIN’s return from the contract.

At one level, the result is not too surprising. “We” have been generally aware at least from the Optus Now here and here controversies several years back that the major sporting organisations were generating very substantial revenues from internet streaming in addition to the broadcast (pay and/or free-to-air) rights. If you are drafting an exclusive licence relating to the right to communicate to the public, therefore, you will need to pay careful attention to what exactly is intended to be included: the whole right to communicate to the public, broadcasting (in some one or many of its multifarious forms), internet streaming etc.

Beach J has ordered that Lucky Homes (the builder) and Mr Mistry (the owner) pay Henley Arch $34,400 by way of compensatory damages and, respectively, $25,000 and $10,000 additional damages. There was no apportionment of liability under the Wrongs Act. Instead, Beach J also ordered that the builder pay to Mr Mistry however much he pays of the compensatory damages and half of the additional damages he pays.

Time and space mean that this post will look at the apportionment issue. Issues arising from the damages findings may get covered in a later post.

Some facts

In 2010/2011, the Mistrys had Henley Arch build them a home. In 2013, they started negotiating with Henley Arch for it to build another home, their dream home, based on another Henley plan, the Amalfi. They requested, and Henley arranged for, a number of modifications to the basic plan. Their preferred facade would have cost $10,000 more than the “basic” facade.

In October 2013, just before they were to sign the final contracts with Henley, they were introduced to Lucky Homes. Lucky Homes was prepared to build the home with their preferred facade and “some” changes for pretty much the same price as the “basic” facade that Henley would build. The Mistrys got Lucky Homes to build the house for them instead.

Apportionment

Perhaps the point of most general application to all IP statutes is Beach J’s ruling that the state law provisions allowing liability to be apportioned between wrongdoers under s 24AI of the Wrongs Act 1958 (Vic) had no application to copyright infringement.

As is often the case in these types of cases, the builder – Lucky Homes – says the owners – the Mistrys – told me they owned the copyright and, of course, the Mistrys claim Lucky Homes the builder said he would make sufficient changes that there would not be any copyright issue.

While not impressed with the witnesses for either camp, Beach J accepted the Mistrys’ version of events this time.

The Mistrys had provided Lucky Homes with a copy of Henley’s pro forma plan for the Amalfi rather than the customised version Henley had modified to meet their particular requirements. The pro forma plan had Henley’s copyright notice clearly marked on it. Mr Shafiq, for Lucky Homes, had annotated the pro forma plan with the various changes the Mistrys wished to make, such as converting a powder room to a prayer room. According to the Mistrys, Mr Shafiq told them he would make 15 or 20 changes so that the redesign would not infringe Henley’s copyright. Mr Shafiq had also tried to persuade the drafting service Lucky Homes used to lie about which drawings had been used as the starting point for the building plans.

Following the findings of infringement and how much damages would be, the first question was whether there was power to apportion liability.

The Copyright Act, like the other Commonwealth intellectual property statutes – the Patents Act 1990, the Trade Marks Act 1995, the Designs Act 2003, the Plant Breeders Rights Act 1994, does not include provisions to apportion liability.[1] So, the Mistrys invoked the Victorian Wrongs Act.

(a) a claim for economic loss or damage to property in an action for damages (whether in tort, in contract, under statute or otherwise) arising from a failure to take reasonable care; and

(b) a claim for damages for a contravention of section 18 of the Australian Consumer Law (Victoria).

Beach J said neither of these requirements were satisfied. In particular, at [266] a claim for copyright infringement is not a claim for failure to take reasonable care.[3] And at [267], the Mistry’s attempt to invoke s 87CD of the Competition and Consumer Act 2010 was “misconceived”. Moreover, his Honour at [267] considered that the Copyright Act provides a complete scheme for a copyright owner to recover damages from both the primary infringer and an authoriser. Therefore, it “overrode” the provisions of the (State enacted) Wrongs Act.[4] Accordingly, apportionment was not possible. However, the respondents could (and did) cross-claim against each other.[5]

The cross-claims

Lucky Homes cross-claimed against the Mistrys on the basis that the building contract included a warranty and indemnity that the Mistrys owned the copyright in the plans they provided.

That didn’t get up in view of the copyright notice on the pro forma plans and the Judge’s acceptance of the Mistrys’ case that Lucky Homes through Mr Shafiq had claimed it could change the plans sufficiently to avoid infringement.

Conversely, those findings meant that the Mistrys’ cross-claim for misleading or deceptive conductive succeeded. Therefore, Beach J ruled that Lucky Homes should pay the Mistrys all of the moneys they paid to Henley on the compensatory damages.

Beach J also ordered Lucky Homes to pay Mr Mistry half the additional damages he pays. Mr Mistry was entitled only to damages for loss (i.e., here the additional damages he was ordered to pay to Henley) to the extent the loss was causally connected to Lucky Homes’ misleading or deceptive conduct. His Honour considered that much of Mr Mistry’s conduct that warranted the award of additional damages against Mr Mistry was not causally connected to Lucky Homes’ misleading or deceptive conduct. So, on a “rough and ready assessment … given the modest amounts involved” his Honour arrived at 50%.

Don’t rush off to add negligence claims to your pleadings now. Although not referred to by Beach J (as it wasn’t in issue), s 24AF(3) says that the fact that a claim is an apportionable claim under s 24AF(1) does not limit liability under any other law. That appears to mean that liability for infringement would stand even if the negligence claim could be apportioned. ?

A practical consequence of this is that the copyright owner can get its money from either or both sets of respondents. That is, vis a vis Henley, both Lucky Homes and the Mistrys are on the hook for all the compensatory damages awarded. If only one has the money to pay the award, Henley could be paid the full amount by that party and the “paying” party would be left to try to recover a proportion from the impecunious respondent. ?